Liberata, the contractor dealing with education maintenance allowances, has not been fined despite the hold-ups that have left thousands of teenagers without their payments, FE Focus can reveal.
Sources confirm that consideration of the widely-anticipated fine, which could have been imposed under the firm's contract with the Learning and Skills Council, has been put to one side as administrators concentrate on what they regard as the more urgent task of processing the payments backlog.
While the quango has refused to comment on its discussions with the firm about the contract, senior sources close to the Department for Children, Schools and Families said there had been fears that imposing a fine on the firm could upset the delicate negotiations over recent weeks that have seen the application process speeded up.
Liberata has already been forced to increase its costs for the contract by recruiting extra staff to deal with the applications.
Online reports had led to many assuming a Pounds 3 million fine had been imposed on the company. News that the penalty remains unpaid will anger the National Union of Students, which has said the reported Pounds 3 million fine should be used to benefit students.
Beth Walker, NUS vice-president, said: "The allowances are a vital source of day-to-day support for hundreds of thousands of students in further education. The current delays to processing applications are totally unacceptable.
"Students should not be put at risk. There must be a full investigation into why many thousands of learners have been failed and to ensure that this situation can never occur again."
Liberata now has extra staff working on the applications as it resorts to manual processing of students' details after the failure of the automated systems intended to handle the workload.
The American-owned company took the contract over from Capita and has an Pounds 80 million, six-year deal to process the grants of up to Pounds 30-a-week that are aimed at preventing teenagers from dropping out of education as a result of pressure on family finances.
Some colleges have been forced to pay emergency money to allowance applicants in anticipation of recovering the cash from the LSC. This has seen finance departments bogged down in red tape as they carry out their own means tests of teenagers to make sure they are entitled to the money in advance of official approval.
Colleges have also reported being drawn into difficult conversations with parents considering pulling their children out of college for financial reasons as bottlenecks continue in the application process.
The Association of Colleges estimates that as many as 250,000 teenagers could still be awaiting payments.
The LSC says rapid progress is being made with the rate at which "notices of entitlement" are being finalised and sent out to teenagers. But even where these have been issued, colleges have had problems registering the teenagers as on their books, which has to be done before the payments are sent out. David Collins, chief executive of the Association of Colleges, said: "If it is true the LSC have not imposed a penalty, then I would hope this was because to do so would have further endangered the distribution of allowance funds.
"Colleges have incurred extra costs in endeavouring to ensure that students have not suffered throughout this fiasco and I would have thought at some point Liberata would be expected to foot the bill."
Liberata declined to comment.
Ferret, page 4.